The Death Of The Supreme Court Of International Trade
Members of the WTO Appellate Body. (Photograph: WTO)

The Death Of The Supreme Court Of International Trade

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Thanks to America, and to the detriment of India and the world, the end of the World Trade Organization Appellate Body is nigh. This de facto Supreme Court of international trade will breathe its last breath on Dec. 10, 2019. Why should its demise matter? How should its judges interpret disputed terms in a WTO treaty? These two seemingly unrelated questions are directly linked.

The Death Of The Supreme Court Of International Trade

America accuses WTO Appellate Body judges of being activists, hence the United States is asphyxiating a court that was born of the 1986-1994 Uruguay Round on Jan. 1, 1995, along with the WTO itself. India benefits from the Appellate Body, and it allows India to benefit the world. Unless the U.S. stops blocking the appointment of new Appellate Body judges to replace those whose terms are expiring, on Dec. 11, the court will lack the minimum three judges required to hear a case. America’s obstinacy is rooted in its difference with India and all other WTO members over judicial interpretative methodology.

Benefits To India...

Of the 27 persons who have served on the Appellate Body, two have been from India, both of whom the WTO members approved for the maximum two, four-year terms: Ujal Singh Bhatia (2011-2019) and Arumugamangalam Venkatachalam Ganesan (2000-2008). India thus ranks second for years of service on the court.

Indeed, Bhatia has been its chair. So, this court gives Indian trade experts high-profile opportunities to decide cases, and thereby shape multilateral trade law. Indian law students study their decisions for the meaning and application of trade terms. After graduation, they sharpen their skills working with, and litigating against, lawyers from other countries.

Ujal Singh Bhatia, chairs a meeting of the WTO Appellate Body on June 22, 2018. (Photograph: WTO)
Ujal Singh Bhatia, chairs a meeting of the WTO Appellate Body on June 22, 2018. (Photograph: WTO)

Appellate Body decisions create a stable, predictable rule-of-law framework that Indian businesspersons seek when they make choices about importation, exportation, and foreign direct investment. Those decisions also are a fillip for reform, both in the Indian economy (when India loses a case and needs to revise its trade measures) and in economies with which India engages (when India wins and expects change abroad). In India and abroad, progressive governments can use Appellate Body rulings as clubs for trade liberalisation with recalcitrant politicians.

Simply put, Appellate Body jurisprudence catalyses positive synergies for India’s legal, business, and policy communities.

The synergies are thanks to the Dispute Settlement Understanding, one of the Uruguay Round treaties, which creates a three-step game on a level playing field to resolve disputes: consultation, adjudication, and compliance. The common metaphor for the DSU as the WTO “crown jewel” is apt.

In the nearly 25-year DSU history, 41.4 percent of cases were settled through consultation, 58.6 percent resulted in a panel, and 43.5 percent did not settle during panel hearings and thus led to a panel report.

One of the jewels is the Appellate Body.

In 29 percent of all cases filed, and 66.7 percent of cases resulting in a panel report, the complainant and/or respondent appealed, so the Appellate Body issued a report. The litigants took its affirmance or reversal of panel rulings seriously. In just 11.6 percent of cases was there a fight about compliance that required recourse to the Appellate Body. Amazingly, in just 6 percent of cases that resulted in a panel report – or 1 percent of all 573 cases filed – has there been authorisation for the complainant to commence trade retaliation against the respondent because the latter failed to comply. That’s an enforcement record of which domestic courts in any of the 164 WTO members would be jealous.

…And Benefits From India

India is another jewel in the WTO’s DSU crown. It’s rather a role model for developing countries. India is active as complainant, respondent, or third-party in 24, 32, and 162 cases, respectively. India accounts for just 2.1 percent of global goods and services trade, yet litigates in 38 percent of all cases. In other words, India punches above its weight. And, it boxes with heavyweights, America and the EU, in 19 and 18 cases, respectively.

When India punches, it occasionally lands impressive blows.

In 2001, India scored a knockout in the Bed Linen case it brought against the European Union. India alleged EU anti-dumping rules that allowed for “zeroing” violated a Uruguay Round treaty, the Antidumping Agreement. Absent guidance from the WTO Ministerial Conference (the supreme decision-making authority), the Appellate Body had no choice but to interpret key words in that treaty, such as “fair,” “all,” and “comparable.” India won. The EU complied, dropping zeroing. In 2001, India needed coaching from outside counsel to help it in Bed Linen. Today, after two decades of experience, India can fight for itself.

Bed Linen set an informal precedent America despised. For the Appellate Body, Bed Linen (and its progeny) were guidance. Moreover, its job is to harmonise jurisprudence – equal justice under law for all WTO members. Surely, it’s unjust to allow America to zero against Indian—or any other member’s—exports, when it’s illegal for the EU to do so. Yet, the U.S. was hooked on zeroing, seeing it as an indispensable remedy against unfair trade. It’s not. Nobody else zeroed in anti-dumping cases after Bed Linen. America fought on, alone, losing over a dozen Appellate Body cases that U.S. Trade Representative Robert Lighthizer slammed as “erroneous,” “unpersuasive,” and “flawed [in] reasoning.” Not in deference to those rulings, but by administrative fiat, the U.S. Department of Commerce finally ended zeroing in all but targeted dumping cases.

U.S. President Donald Trump listens as Robert Lighthizer, U.S. trade representative, speaks in the Rose Garden of the White House in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)
U.S. President Donald Trump listens as Robert Lighthizer, U.S. trade representative, speaks in the Rose Garden of the White House in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

Judicial Interpretation

Despite those losses, America’s WTO litigation record is excellent: it wins 87 percent of cases it files, loses 75 percent of cases filed against it, and both figures are above the average for all WTO members.

Nonetheless, the institution the administrations of President George HW Bush and Bill Clinton championed during the Uruguay Round as necessary for recourse against errant panel rulings became, for the administration of Barack Obama, a threat to American sovereignty. For the administration of Donald Trump, the Appellate Body puts America Last. The USTR’s Trade Policy Agendas compile objections to this enemy of the people:

  1. decisions are delayed;
  2. judges hear cases after their terms expire;
  3. decisions cover facts;
  4. decisions go beyond issues necessary to decide the appeal; and
  5. decisions are precedent.

The first three are easily rebutted: cases are more complex, with multiple issues mixed with facts and law, so they take longer than the 9-18 months the DSU allots. There is merit in the fourth, but what court is free of obiter dicta? The response to the fifth is this columnist’s Stare Decisis Trilogy: the rule of law demands that like cases are decided in a like manner.

So, the real underlying reason America chokes the WTO Supreme Court of new judges is it objects to how the old ones decided cases.
The WTO Appellate Body meets on June 22, 2018. (Photograph: WTO)
The WTO Appellate Body meets on June 22, 2018. (Photograph: WTO)

The Obama and Trump administrations demand any new judge stick to a strict constructionist approach to legal interpretation:

  • Look only to the plain, or ordinary, meaning of a disputed treaty term by using only a trusted dictionary definition.
  • Don’t search beyond the treaty text to the context of that treaty (e.g., historical factors that shaped its drafting) to understand what a word means.
  • For God’s sake, don’t look beyond text or context to pragmatic concerns, such as how women, workers, non-westerners, or LGBTQ+ persons might be affected by how words are defined.

The U.S. wants judges to be robots with limited AI: apply a lexicographic algorithm to resolve interpretative controversies.

India, and other WTO members still think judges ought to judge. They appreciate the DSU mandate to the Appellate Body – adhere in decision-making to Articles 31-32 of the 1969 Vienna Convention on the Law of Treaties – is liberating, not constraining. These Articles refer not only to the “ordinary” lexicographic meaning of a word, but also to its “context,” in light of the “object and purpose” of the treaty. They allow for an examination of other documents, such as contemporaneously concluded agreements, and supplementary evidence. These Articles do not force judges to look only at the Oxford English Dictionary. Rather, they allow for a holistic, simultaneous, examination of text, context, and related points.

As this columnist and Eric Witmer show in a new Connecticut Journal of International Law article, these categories, sum to a tool kit of interpretative methodologies, namely, Textual, Contextual, and Pragmatic. The Convention is a kit containing multiple valid tools. Appellate Body judges can pick from the toolbox ones useful for text, context, and/or on pragmatic problems. The best is the one that resolves a case in the best possible way. This open-minded mindset treats treaties as living documents adaptable to changing global circumstances. America’s ideological fixation on one tool hammers legal texts into a petrified forest.

What Happens Next?

With no Appellate Body to which to appeal cases from panels, India and other WTO members can invoke DSU Article 25. That’s bilateral arbitration. The EU and Norway will do so. India’s best short-run option is to join them. But, Article 25 is sub-optimal: it’s not a return to the pre-Uruguay Round law of the jungle, but it’s not full-fledged, hard law Appellate Body adjudication. And, it’s useless for India to appeal against the U.S. in India’s loss in the export promotion case.

India’s best long-run option is to hold true to what it and the rest of the WTO membership know is right: America’s effort to export to the Appellate Body its anomalous interpretative ideology is parochial in theory and ruinous in practice.

Raj Bhala is the inaugural Brenneisen Distinguished Professor, The University of Kansas, School of Law, and Senior Advisor to Dentons U.S. LLP. The views expressed here are his and do not necessarily represent the views of the State of Kansas or University, or Dentons or any of its clients, and do not constitute legal advice.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

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